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Friday 24th Jun, 2022
Everyone already knows that miners are at the heart of the cryptosystem. Initially, only mining bitcoins were later adopted by Ethereum. Still, of course, as you see, this mining activity has a bad impact on the environment for one reason so many people are still rejecting crypto. But what happens if the problem is successfully resolved?
2022 is when Ethereum will complete the biggest protocol change in crypto history. The Merge, previously known as Ethereum 2.0, will be one of the most important histories in the crypto world; this, of course, cannot be separated from the fact that the Ethereum Blockchain is the most crowded Blockchain in terms of transactions.
Then, what is The Merge Ethereum? When is The Merge done? How will this impact ETH, and how much will this change cut the energy consumption of the Ethereum blockchain? Check out the full explanation in this article.
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Source: Ethereum.org
The Ethereum merge is a transition or upgrades to the Ethereum blockchain. Initially, Ethereum used the Proof-of-work (PoW) consensus protocol; it became a proof-of-stake (PoS) consensus protocol far superior to proof-of-work.
As previously mentioned, this is because Ethereum has been one of the busiest Blockchains since the NFT boom, and DeFi usage has increased significantly. Moreover, so many transactions have to be processed on the Ethereum blockchain, which makes gas fees very high and burdens the users of the Ethereum ecosystem.
That's not the only reason, based on existing research. The Proof-of-work consensus underlying Bitcoin has been known to consume the energy equivalent of a medium-sized country, which energy must be supplied to keep PoW secure.
For some reason, the Ethereum merge continues to be realized, and by moving to Proof-of-Stake (PoS), most of the current shortcomings in Ethereum will be resolved. However, this transition requires various stages of the process that must be passed.
Following the launch of Beacon Chain, which operates independently of the Proof-of-Work Chain, which is the first step towards The Merge Ethereum. This stage is the first step in the transition to Proof-of-Stake, where the Beacon Chain serves to accept deposits for users who wish to stake their ether to help validate transactions.
More than 11 million Ethereum staked as of April 2022, and more than 340,000 validators have been established. All that ether will be irrevocable until the mainnet has been merged.
Currently, Ethereum will enter the Merge stage. The Merge stage is where Ethereum will move completely from PoW consensus to PoS, and when the Merge is complete, mining using energy-consuming hardware will no longer be needed.
According to Cointelegraph, the Ethereum Foundation asked network stakeholders to test the PoS consensus that will be implemented using the Kiln testnet, to ensure a smooth transition before the PoS mechanism is fully implemented.
With the Kiln Ethereum testnet fully functioning as a proof-of-stake testnet, Ethereum is very close to completing the transition from proof-of-work to proof-of-stake. On Twitter, the Ethereum Foundation developer said, “It won't be June, but likely in the few months after. No firm date yet, but were definitely in the final chapter of PoW on Ethereum”.
From that, we can conclude that the Merge will again be delayed from the beginning in June to a few months later between Q3/Q4 2022. “There is a lot of skepticism because Ethereum has promised proof of commitment for five years,” said Beiko. "It's hard to convince people that this time is real."
Only after the Merge will we enter the final stage, namely the Shard Chain, where this stage is important in increasing the scalability of the Ethereum network later.
You may still be wondering why this process is so important to run? Since 2014, the Ethereum community has been researching Proof of Stake (PoS). This study was prompted by concerns about the high energy consumption required to process cryptocurrency transactions.
Data from Ethereum shows that Ethereum's proof-of-work mechanism consumes about 73.2 TWh annually, an energy consumption equivalent to a medium-sized country like Austria.
When the proof-of-stake is fully executed, Ethereum's energy expenditure will drop drastically and is roughly equal to the amount of energy to run a home computer for each node on the network.
This switch from PoW to PoS aims to improve the Ethereum network's speed, efficiency, and scalability, making it more environmentally friendly and able to process more transactions while reducing network congestion.
With increased scalability or an increase in the number of transactions that Ethereum can process at a faster time, the gas fees that Ethereum users must pay will also decrease.
Someone can't predict with certainty the future price of Ethereum after the Merge has occurred. People can expect the price because it is difficult to predict the exact number of Ethereum prices. Still, it is only speculation, for the accurate price is beyond everyone's control.
However, there are several factors or reasons for Ethereum to experience a very significant price increase due to the merged effect. Of course, these reasons are still related to the basic economic principles of supply and demand. These factors include:
After Ethereum transitions with the Merge to move from Proof-of-Work to Proof-of-Stake consensus, mining activities will be stopped because they are no longer needed. Mining will no longer have a monetary reward. In fact, the reward will be reduced from the earlier those who produce too much new Ether and enter the market circulation will be reduced by about 90% of the annual issuance.
This means that if you look at it statistically, the production of Ethereum every year will be reduced by 90%. So, for example, in a year, there are 1 million Ethereum coins that are successfully produced, then it will decrease by 90% or reduce 900,000 coins and leave only 100,000 coins that have been successfully produced. It certainly makes Ethereum much more valuable in the future.
Since the launch of Beacon Chain, the first step for the Merge, there have been 11 million coins locked because of the large number of users and investors who believe in the prospect of Ethereum after the Merge.
Currently, the staking reward given is around 5%, and if the Merge has been launched, then the rewards that will be given from the results of staking the coins that you will lock also can increase. It is because all revenue that goes into the Ethereum protocol will be distributed to stakeholders.
It will certainly make investors try to get ether coins so they can stake. It also has the potential to cause the price of ether to experience a sizeable increase due to increased demand. Still, the supply continues to dwindle due to ether production, which has been significantly reduced and more and more is locked, resulting in less Ethereum circulating in the market.
EIP-1559 burns ETH used to pay transaction fees on the Ethereum network, such as exchanging coins on a decentralized exchange or transferring NFTs. EIP-1559 is one of five updates introduced as part of the London hard fork. After Ethereum experiences, the Mer EIP-1559 will also be one of the reasons the supply of Ethereum circulating in the market will be less, and of course, once again it will make the price of Ethereum soar high.
Those are the three factors that are why Ethereum will experience a very high bull after the Merge is launched.
The Merge is one of the most important histories in the crypto world; when the Merge Ethereum is successfully launched, it will have a huge impact on other cryptos, especially those in the same ecosystem as Ethereum. Although the Merge is still experiencing delays, Ethereum with Proof-of-Stake consensus will be fully completed in 2023; then, Ethereum and the crypto industry will enter a new era.
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